Retail inflation now stable and within acceptable range: Finance Minister
What's the story
Finance Minister Nirmala Sitharaman announced on Monday that the country's retail inflation has stabilized and now falls within the acceptable range of 2% to 6%. In a written response to the Lok Sabha, she stated that retail inflation dropped from an average of 7.1% between April and October 2022 to 5.4% during the same period in 2023. The Finance Minister attributed occasional inflation spikes to demand-supply imbalances caused by global events and unfavorable weather conditions.
Details
Core inflation rate drops, easing inflationary pressure
Sitharaman emphasized that a consistent decrease in core inflation, calculated by excluding volatile food and fuel items from retail inflation, played a crucial role in reducing inflationary pressure on the Indian economy. The core inflation rate fell from 5.1% in April 2023 to 4.3% in October 2023. Since the introduction of the inflation tolerance band in 2016, India's retail inflation has mostly remained within acceptable limits.
What Next?
Government and RBI measures help resolve demand-supply mismatches
The Finance Minister credited the government's proactive supply-side initiatives and the Reserve Bank of India's (RBI) effective demand stabilization measures for addressing demand-supply mismatches and controlling inflation. These government actions include bolstering reserves for essential food items, conducting periodic open market releases, facilitating imports of crucial food items through trade policy measures, preventing hoarding by imposing or revising stock limits, and directing supplies through designated retail outlets.
Insights
Initiatives for food security and increased subsidy under Ujjwala scheme
Sitharaman also mentioned the extension of the Pradhan Mantri Garib Kalyan Anna Yojana for five years, starting January 1, 2024, to ensure food security for the poor. This program provides free food grains to approximately 81.35 crore beneficiaries. The government has also increased the subsidy under the Pradhan Mantri Ujjwala Yojana from Rs. 200 to Rs. 300 per 14.2 kg cylinder in October 2023.